Libya's $2.5 Billion Iron Project: What It Means for Gulf Trade and Investment

The Tosyalı-SULB development near Benghazi could expand Libya's industrial exports and create opportunities for Gulf suppliers. The project is advancing toward a targeted 2028 start, but its commercial prospects will depend on energy costs, transport infrastructure and international buyers.

Libya's $2.5 billion iron project near Benghazi is drawing attention in the Gulf, where disruptions to regional shipping and changes in international steel trade have increased interest in alternative industrial supply routes.

On October 17, 2026, Gulf Today reported that the Tosyalı-SULB direct reduced iron (DRI) complex could open opportunities for Gulf businesses involved in industrial equipment, energy infrastructure and maritime services.

The project is being developed at Ras Al-Mangar, east of Benghazi, through a partnership between Turkish steelmaker Tosyalı Holding and Libya United Steel Company for Iron and Steel Industry (SULB). Its planned investment is estimated at approximately $2.5 billion, with commercial production targeted for early 2028.

Ahmed Gadalla, chairman of Tosyalı-SULB, told Reuters in September that around 90% of the complex's planned production would be exported. The project is intended to serve international steelmakers while supporting further industrial development within Libya.

Recent construction updates give a clearer picture of its progress. According to company information reported by SteelOrbis on October 14, approximately 40% of construction work has been completed, while the latest project plan targets annual capacity of 7.5 million metric tonnes across three phases.

For Gulf businesses, the opportunity is tied to the equipment and services required to build and operate a large iron-processing facility. For Libya, the larger question is whether the investment can turn natural gas into a competitive manufactured export.

Tosyalı-SULB: Construction progresses toward 2028 production

The Tosyalı-SULB complex is being developed in stages, beginning with a direct-reduction facility designed to manufacture 2.5 million tonnes of cold DRI annually.

In February 2025, Midrex Technologies and SMS group confirmed an equipment order for this first phase. The project will use MIDREX Flex technology, which allows iron ore to be reduced using natural gas and can accommodate hydrogen if suitable supplies become available.

DRI is an ironmaking material used by steel producers, particularly those operating electric arc furnaces. Unlike conventional blast-furnace ironmaking, direct reduction does not require coal-derived coke as the principal reducing agent. Gas-based production can have a lower emissions intensity than traditional coal-based routes, although actual emissions depend on the energy supply and operating conditions.

The scale of the Libyan development has been revised since its announcement. Tosyalı's original 2024 plans described a three-phase complex targeting 8.1 million tonnes annually. The joint venture's current project information gives a planned total of up to 7.5 million tonnes, with 2.5 million tonnes in the first phase.

The construction work has also moved beyond foundations. Recent company updates describe structural steel installation and concrete works across the complex, alongside the development of supporting infrastructure.

These milestones establish physical progress, although the reported completion percentage comes from the company. The first production unit has yet to be commissioned, and commercial output remains a future target.

Where Gulf companies could find opportunities

Gulf businesses have developed considerable experience in industrial construction and energy-intensive manufacturing, including steelmaking and the infrastructure that supports it.

The Benghazi project presents possible opportunities for contractors and suppliers with experience in those fields, particularly as construction moves toward equipment installation and commissioning.

A direct-reduction complex requires specialized mechanical and electrical systems, process controls and continuing maintenance once production begins. International equipment manufacturers will provide key technology, but operating the plant will create recurring demand for technical services and replacement components.

Maritime logistics could become another area of commercial cooperation.

The project is located on Libya's Mediterranean coast, allowing future shipments to reach southern European and North African markets without passing through the Strait of Hormuz. That geographical position has become more relevant following the disruptions to shipping associated with the Iran conflict in 2026.

For a Gulf logistics company, participation might involve arranging cargo movements, providing maritime services or developing commercial relationships with Libyan industrial operators.

However, potential business opportunities should be distinguished from agreements already concluded. Neither the Gulf Today report nor the recent project disclosures identify specific Gulf investors or confirmed shipping contracts associated with these opportunities.

The scale of the proposed production creates a possible market for industrial services. Actual business will depend on procurement decisions, contract terms and the progress of construction.

Natural gas will determine much of Libya's production cost

Libya's natural gas resources are central to the economic case for Tosyalı-SULB, but the availability of gas for industrial users remains a practical constraint.

According to the US Energy Information Administration, Libya held approximately 53 trillion cubic feet of proved natural gas reserves at the beginning of 2024.

Reserves alone provide little indication of how much gas can be delivered to an industrial facility. Libya's dry gas production declined from 423 billion cubic feet in 2022 to 394 billion cubic feet in 2023, while domestic consumption reached approximately 305 billion cubic feet.

Electricity generation accounted for about 85% of domestic gas consumption in 2022, leaving industrial users dependent on a supply system already serving substantial demand.

In a September 10 interview with Reuters, Ahmed Gadalla said gas supply arrangements for Tosyalı-SULB's first phase had been finalized. He also confirmed that a dedicated power station was being developed to meet a large share of the complex's electricity requirements.

Those arrangements address important operating needs, although the contracted gas volumes, prices and duration have not been publicly detailed.

The commercial effect will become clearer when the facility begins operating. Gas prices influence the cost of reduction, while supply interruptions can affect production schedules and delivery commitments.

Libya's ability to offer competitively priced gas will be an important factor when buyers compare the Benghazi facility with established producers in the Gulf and North Africa.

Mediterranean shipping offers an alternative route

The coastal location of the Tosyalı-SULB complex offers access to European markets across relatively short Mediterranean shipping routes.

For steelmakers in Italy and other European countries, geographical proximity can reduce sailing distances compared with supplies shipped from the Gulf. It does not establish the total cost of delivering iron to customers, however.

The form of iron being exported is an important consideration.

The contracted first phase is designed to produce cold DRI. This product requires careful storage and handling because it can react with moisture and oxygen. Hot briquetted iron (HBI), produced by compacting hot DRI into dense briquettes, is generally better suited to maritime transportation.

Midrex's technical guidance explains that cold DRI can be transported by sea, provided operators follow appropriate cargo-handling and safety procedures. HBI has different handling characteristics and is less reactive during storage and shipment.

The Benghazi project's eventual export costs will therefore be influenced by its loading facilities and the handling arrangements selected for the intended product.

For shipping companies, this creates a specialized logistics requirement. For Tosyalı-SULB, it forms part of the calculation that will determine whether Mediterranean proximity translates into a competitive delivered price.

Gulf steel producers are also competing for international buyers

The Gulf's relationship with Libya's emerging DRI industry is not limited to potential investment and services.

Several Gulf-based industrial projects are targeting similar international markets.

In Oman, Meranti Green Steel is developing an HBI facility in the Duqm Special Economic Zone, with planned first-phase capacity of 2.5 million tonnes annually.

In January 2026, Meranti announced that it had secured offtake arrangements covering the planned output of its first module.

The agreements include one million tonnes annually for Thyssenkrupp Materials Trading and 250,000 tonnes for INTERFER, with the remaining production allocated between Glencore and Meranti's proposed steelmaking operations in Thailand. Some of the intended deliveries are aimed at European markets.

Those commitments offer an indication of commercial demand for imported ironmaking materials. They also show that new producers are working to secure buyers before their plants begin operating.

Tosyalı-SULB will enter a market where established and developing facilities are already competing for customers.

The project's success will require a competitive delivered price and consistent product specifications. Customer agreements will be especially important for an export-oriented facility with substantial planned annual output.

For Libya, the Omani example illustrates how new iron projects can establish an international customer base. For Gulf businesses, it shows that future commercial relationships with Libya could involve cooperation in some activities and competition in others.

Europe's carbon rules add another commercial requirement

European steelmakers are under pressure to reduce emissions, and the EU's Carbon Border Adjustment Mechanism (CBAM) has changed the information required from suppliers outside the bloc.

CBAM entered its definitive phase in January 2026 and covers specified industrial imports, including iron and steel. The system links carbon-related import obligations to the emissions associated with production.

For a natural-gas-based DRI facility such as Tosyalı-SULB, this means emissions reporting will be relevant to any future EU sales.

The European Commission's CBAM guidance explains the information that non-EU iron and steel producers need to provide so European importers can calculate their obligations.

Natural-gas-based DRI can have a lower carbon intensity than conventional coal-based ironmaking, but the applicable carbon cost will depend on verified production data and the EU calculation rules.

The Libyan project has selected technology that could incorporate hydrogen in the future. Its initial economics, however, will be based on natural gas.

European customers will assess the plant's actual product quality and delivered cost, including any applicable carbon-related charges. The availability of reliable emissions data will be part of that commercial assessment.

What the investment means for Libya's non-oil economy

Libya's interest in expanding industrial exports is closely connected to the structure of its economy.

The World Bank estimates that hydrocarbons accounted for approximately 65% of GDP, 93% of exports and 72% of government revenue in 2024.

Large-scale manufacturing investments offer a way to create additional economic activity beyond the direct extraction and export of oil and gas.

A functioning DRI complex would use natural gas as an industrial feedstock, producing iron that can be sold to steelmakers. It would also require technical workers and supporting businesses capable of maintaining a large industrial operation.

The wider economic contribution will depend on how much of that activity can be carried out by Libyan companies.

International contractors and technology suppliers are necessary to develop a facility of this scale, but local participation can expand as businesses acquire the technical capabilities needed to supply the project.

For example, recurring industrial maintenance contracts can give domestic engineering firms opportunities to build specialized expertise. Similar opportunities may emerge in transport and equipment servicing once the plant enters operation.

These outcomes will have to be measured through actual procurement and employment records. The announced investment amount does not establish how much spending will ultimately remain in Libya.

The next steps for Tosyalı-SULB

The project is currently targeting commercial production in early 2028, with construction reported at approximately 40% completion in October 2026.

The immediate milestones concern the completion of the first DRI unit and the commissioning of its supporting energy systems. Once those facilities are operational, production data will provide a clearer measure of the project's technical performance.

Commercial arrangements will be equally important. The intended export share is substantial, but the company has not publicly identified confirmed buyers for the planned output in the recent announcements reviewed here.

Long-term sales agreements would provide stronger evidence of market demand and help establish how competitively the facility can deliver its product.

For Gulf industrial suppliers, the development represents a potential source of future business in the Mediterranean. For Libya, it is an opportunity to expand an existing ironmaking industry through a new large-scale investment.

The next meaningful evidence will come from completed infrastructure and customer contracts, followed by production and export figures after commissioning. Those results will determine how far the Benghazi complex can contribute to Libya's industrial economy and its commercial relationships with the Gulf.